Hedge Fund Charges Not Catching on with UK Mutual Funds

Britain’s mutual funds are shunning a hedge fund-style method of charging clients, where investors pay fees as a proportion of outperformance by the fund manager, following a revolt by financial advisers selling the funds, a study has found.

Reported by Chris Vellcott, research by Lipper published on Monday shows that after initial enthusiasm for performance fees in 2007, the number of funds using the structure stands at 80, compared with 112 having charged the fees at one time.

In a 2007 study, Lipper found 34 funds had adopted performance fees, rising to 81 funds three years later.

The fact the number has not risen since 2010 “reflects not only a slowing of funds being launched with performance fees but also the closure of funds and the removal of performance fees,” Lipper said.